Mr. Matt Ronan:

I am spokesperson for Health Stores Ireland. I am joined by my colleagues, Dr. Dilis Clare, GP and medical herbalist, and Mr. Kevin Hurley, a tax agent from CKH Fiscal Services who for the past few years has been advising our organisation on the VAT treatment of food supplements. I thank the Chairman and the other members of the joint committee for the interest they have taken in the issue and inviting us to address them on the most serious threat ever to face the health food industry in Ireland, that is, the imposition of VAT on food supplements.

There are health food stores in every town in Ireland. They are mostly small, independent family-run businesses which are an integral part of the local community. The imposition of this unwarranted tax will undoubtedly lead to the closure of many of them and the loss of hundreds, if not thousands, of jobs. We have made a submission to the committee which sets out a lot of the background to the issue and I hope members have had a chance to read it.

I will summarise the five reasons the imposition of VAT on food supplements should not proceed. We are being told that we are about to have a no-deal Brexit budget. The Minister for Finance, Deputy Donohoe, has stated it will be a safe and careful budget which will help citizens, families and communities that could find themselves dealing with real change as a result of a no-deal Brexit. If the United Kingdom crashes out of the European Union on 31 October, new customs tariffs will apply to goods traded between the United Kingdom and Ireland. It is expected that imports of food supplements from the United Kingdom into Ireland which account for the majority of supplements will attract a tariff of 12.8%. If VAT at a rate of 23% is applied, Irish consumers of food supplements will be facing a cumulative increase of 37.8% overnight at the beginning of November. A near 40% rise in price will see a major decline in health supplement consumption, a knock-on impact on the health of citizens and a threat to hundreds of retailers across Ireland. The Minister cannot prevent the United Kingdom from crashing out of the European Union or the resultant WTO tariffs, but imposing VAT on food supplements in the budget is totally at odds with a no-deal Brexit. Instead of protecting Irish consumers and retailers, it would punish them.

It is important to understand the origins of the proposal. It is not because of Government policy and not driven by a desire to raise money, nor is it being demanded by the European Union. It is being done because Revenue's decentralisation of decision-making in 2014 led to contradictory Revenue decisions where given different VAT rates were applied to the same types of supplement. Revenue's answer to an administration problem which it created is to impose a charge on consumers and damage the business of retailers. Revenue, in the shape of its chairman in front of this committee, has claimed that since the end of 2018, the zero-rating of food supplements since 1973 has been on a concessionary basis, but there is no evidence whatsoever to back up this claim. If there was a single email from one Revenue official to another mentioning this concession in the past 20 or 30 years, we would have seen it by now, but no document has been produced showing any evidence that there was ever a concessionary basis for the taxation of food supplements at the zero rate. The industry had never heard of this so-called concession until it was first mentioned by the Minister, in response to a Dáil question in October last year, despite the countless VAT audits that had taken place throughout the country in the 40 years in which there had been food supplements in Ireland. Revenue would have audited the accounts of many firms, retailers and wholesalers in recent years and there has never been an issue with the non-application of VAT to food supplements. There have been no related prosecutions, fines or penalties, interest or back tax payments during the years.

The EU VAT directive does not allow member states to apply a zero VAT vate on a non-statutory or concessionary basis, as Revenue should know better than anybody. Under freedom of information legislation, we obtained evidence in August this year that there had never been any concessionary treatment and that in 2006 Revenue had published instructions for its staff confirming that food supplements were always legally eligible for the zero rate as food in accordance with its interpretation of existing VAT law. In short, the concession argument is bogus and has caused the Minister and members of the committee to be misled.

Any imposition of VAT would impact negatively on health and retailers. The imposition of VAT on these products would also penalise hard-pressed consumers, especially children and the elderly who, with most adults, often use food supplements to maintain good health and address many dietary deficiencies associated with the reality of modern diet and lifestyle. We can provide examples of the positive health benefits of food supplements for members, if they so desire. A serious risk if there is an increase in the price of food supplements is that consumers will abandon their local stores and purchase supplements online, where there is no regulation, advice or guidance on what might or might not be suitable, depending on people's health circumstances. That will guarantee job losses and the closures of small businesses. The sudden imposition of VAT on sports supplements in 2011 led to the decimation of that category of goods which had accounted for 10% of my business. The segment more or less disappeared as if somebody had turned out the lights. People went online to buy their products and that was the end of sports supplements for me.

The resolution of this issue lies with the Minister. An identical situation arose in 2014 regarding VAT on herbal teas. The former Minister, Deputy Noonan, had no difficulty in introducing new zero VAT legislation for those products in that year's budget. I thank members for their continuing interest in this issue. We are happy to take questions on any aspect of this subject. What we hope to do today is to persuade individual members and the committee as a whole of the merit of our case notwithstanding the forces ranged against us. As public representatives, we ask members to reject the proposal that an administrative problem for Revenue be resolved at the expense of ordinary consumers and retailers. We realise that time is short but we hope the committee will take action over the coming days.